Category: Stock Market

Here’s why I think every ASX dividend investor should own shares of Washington H. Soul Pattinson and Co Ltd (ASX: SOL).

‘Soul Patts’ (as it’s more easily known) is an ASX conglomerate that’s sometimes described as the ‘Berkshire Hathaway’ of the ASX. That’s because Soul Patts’ management follows a remarkably similar strategy to that of Berkshire’s famous chief Warren Buffett.

Buffett has made a name for himself by acquiring a diverse range of top-quality businesses that all sit within the Berkshire stable. The combination of these businesses results in a company that Buffett himself likes to describe as a ‘financial fortress’.

And that’s exactly what Soul Patts tries to emulate.

Some of the companies it owns shares of include phone-and-internet provider TPG Telecom Ltd (ASX: TPM), coal miner New Cope Corporation Limited (ASX: NHC), building supplies manufacturer (and part-time landlord) Brickworks Limited (ASX: BKW) and investment company BKI Investment Co Ltd (ASX: BKI). With this healthy cross-section of the ASX, I think Soul Patts is one of the best ways to get broad exposure to the Australian economy outside of buying an index fund.

But it’s the Buffett-esque long-term thinking and eye on the bigger picture that makes Soul Patts stand out, in my view. All of the businesses above pour dividends into Soul Patts every year and all have shown their worth over many years for the company.

An ASX dividend king?

Speaking of dividends, we now come to the crux of this company’s potential. Soul Patts has one of – if not the – best dividend records of any company on the ASX. It has paid a dividend every year since its listing in 1903 – think about that! Its shareholders have enjoyed payouts every year of the Great Depression and every year of the Second World War.

Not only that, but Soul Patts is also the only company on the ASX to have delivered a dividend increase every year since 2000. Anyone who bought shares in the year 2000 (for $3.50) is now getting an approximate yield-on-cost of 16.86% per annum!

One other ASX company – Ramsay Health Care Limited (ASX: RHC) – also held this record but lost it this year when it suspended its dividends, along with many other former ASX dividend heavyweights.

This elevates Soul Patts even higher in my eyes. It remains hands-down the best dividend share on the ASX for these reasons and leaves no argument (in my view) that this ASX share should be in every dividend investor’s portfolio.

More reading

• 2 quality ASX shares to buy for long-term growth
• Is it time to invest in shares or wait on the sidelines?
• Top ASX Dividend Stock Picks for May 2020
• Want to become wealthy? Do this one thing
• 3 of the best ASX dividend shares for income

Motley Fool contributor Sebastian Bowen owns shares of Ramsay Health Care Limited and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia owns shares of and has recommended Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia has recommended Ramsay Health Care Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Why every dividend investor should own this ASX share appeared first on Motley Fool Australia.

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By now, almost all Aussies would be familiar with our record-low interest rates in one way or another. Whether it’s a mortgage costing a homeowner just 2.5% per annum or a term deposit paying 1%, low interest rates have certainly worked their way into everyday life.

But according to reporting in the Australian Financial Review (AFR), we might not be at the end of the road just yet.

But how is that possible given interest rates are at just 0.25% – one cut above zero?

Well, according to the AFR, the Reserve Bank of New Zealand (RBNZ) is in discussions with our ‘big four’ banks, including Commonwealth Bank of Australia (ASX: CBA), in “getting their systems ready” for the possible introduction of negative interest rates, which the RBNZ said, “will become an option” in early 2021.

The AFR quotes the RBNZ as stating: “The committee noted that a negative official cash rate will become an option in the future, although at present financial institutions are not yet operationally ready”.

What are negative interest rates?

If negative interest rates did become a reality across the ditch, our own Reserve Bank of Australia might be forced to follow suit.

Negative interest rates result in a strange situation where borrowers are actually paid to borrow and savers are penalised for saving. We have already seen this paradigm play out in recent years across a few countries, especially in Europe and Japan.

Aside from some odd consequences that we may see (such as cash hoarding), negative rates would probably be a tailwind for ASX shares. That’s because negative rates narrow the range of assets which investors can use to generate real returns to essentially just shares and property. As discussed earlier, bank accounts and term deposits are out, as would be government bonds. What would you rather, some shares of Woolworths Group Ltd (ASX: WOW) yielding 2.95% per annum or a term deposit that costs you 1%?

The answer’s obvious. Thus, if we did see negative rates in Australia or even New Zealand, I would expect demand for ASX shares to rise, with the possible exception of ASX banks.

Negative rates would be terrible for our banks – who will have to try and turn a profit by convincing customers to keep their cash with them for no reward or even under financial penalty, rather than under the mattress.

When a bank has to compete with the bedding for your cash, it’s not a good sign!

More reading

• ASX 200 up 0.35%, CBA gives Q3 update
• With Aussie wages set to fall, could ASX 200 shares follow?
• This is the best ASX big bank stock you can buy right now
• 4 top ASX shares to invest $4,000 into immediately
• How can the ASX 200 soar with rising unemployment?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post Negative interest rates coming? Here’s what it would mean for ASX shares appeared first on Motley Fool Australia.

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The S&P/ASX 200 Index (ASX: XJO) ended the day up 0.35% to 5,422 points. The ASX 200 was down over 1% earlier in the day.

China and Australia’s dispute continues to grow. The Asian superpower reminded Australia how important it is to the Australian economy.

Commonwealth Bank of Australia (ASX: CBA) update

CBA, Australia’s largest bank, announced its third quarter update today in light of the coronavirus. .

The bank said that it has been giving widespread support for the economy.

It said that its March 2020 quarter showed cash profit was down 44% compared to the first half of FY20’s quarterly average.

Both the statutory net profit after tax and cash profit came in at $1.3 billion.

The major ASX 200 bank also announced that it had agreed to sell a 55% stake in Colonial First State for $1.7 billion.

Glittering day for Resolute Mining Limited (ASX: RSG)

Resolute Mining announced it has completed the second tranche of its $195 million capital raising at a price of $1.10 per share. The initial capital raising was launched in January 2020. Today it issued over 7.7 million shares to ICM Limited nominees.

The gold miner was one of the top performers in the ASX 200 today. The Resolute Mining share price went up over 5%.

Large ASX 200 movers

At the green end of the ASX 200 the Pilbara Minerals Ltd (ASX: PLS) share price rose around 11%, the Avita Medical Ltd (ASX: AVH) share price climbed 8.7% and the Mayne Pharma Group Ltd (ASX: MYX) share price grew over 5%.

At the red of the ASX 200 the Orocobre Limited (ASX: ORE) share price fell 7.7%, the Alumina Limited (ASX: AWC) share price dropped 6.6% and the Harvey Norman Holdings Limited (ASX: HVN) share price fell 5.7%.

More reading

• With Aussie wages set to fall, could ASX 200 shares follow?
• This is the best ASX big bank stock you can buy right now
• 4 top ASX shares to invest $4,000 into immediately
• How can the ASX 200 soar with rising unemployment?
• ASX 200 down 0.9%: CBA reveals $1.5bn COVID19 provision & gold miners charge higher

Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited. The Motley Fool Australia has recommended Avita Medical Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post ASX 200 up 0.35%, CBA gives Q3 update appeared first on Motley Fool Australia.

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Could ASX shares follow Aussie wages in moving lower?

Given wage growth is a powerful economic indicator, there’s a strong possibility.

This morning, the Australian Bureau of Statistics (ABS) released its wages data for the March quarter 2020. The ABS reported that the seasonally adjusted Wage Price Index (WPI) rose 0.5% in the March quarter and 2.1% over the preceding 12 months.

It’s worth noting 2 things from these statistics. Firstly, these wage rises barely cover the rate of inflation for the same periods. According to the ABS, inflation was 0.3% in the March quarter and 2.2% over the preceding 12 months.

Secondly, this period only just clips the onset of the coronavirus and associated economic shutdowns and, as such, is more of an indicator of ‘how things were’ compared to ‘how things are’. We’ll have to wait until the statistics for the June quarter are released to get a better idea of how much the economy has been impacted by the coronavirus.

So, what do these wage figures tell us? Well, according to the Australian Financial Review (AFR), the data isn’t too promising from an economist’s point of view. The AFR notes that one economist is predicting an unemployment level of 12% in the weeks ahead and expects the Fair Work Commission to freeze the minimum wage in 2020. All of this points to relatively flat wages (perhaps even declines) for the remainder of 2020.

Most of the downward pressure on wages will come from soaring unemployment. Employers don’t have much of an incentive to offer higher wages for new staff when so many people will be looking for work, however, to temper this blow, inflation is also likely to significantly drop through the remainder of 2020.

What does this mean for ASX shares?

Low wages are a consequence of lower economic growth, which is the underlying issue here both for the economy and (in my opinion) the stock market. Low growth and high unemployment translate directly into consumers spending less money, which in turn is bad news for ASX companies.

Consumer staples companies like Woolworths Group Ltd (ASX: WOW) and Coles Group Ltd (ASX: COL) will likely fair ok, but it’s the consumer discretionary companies that I think investors should watch out for.

With low growth and high unemployment, how many people will be shopping for new TVs from Harvey Norman Holdings Limited (ASX: HVN) or new iPhones from Kogan.com Ltd (ASX: KGN)? Not nearly as many as were in 2019 I’d wager.

We have some sobering numbers here and I wouldn’t be surprised if the flow-on effects emerge on the ASX this year.

More reading

• ASX 200 up 0.35%, CBA gives Q3 update
• 4 top ASX shares to invest $4,000 into immediately
• 3 blue chip ASX dividend shares to buy right now
• 2 ASX shares that could set you up for life
• 3 ASX dividend kings to buy and hold forever

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Kogan.com ltd. The Motley Fool Australia owns shares of COLESGROUP DEF SET and Woolworths Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post With Aussie wages set to fall, could ASX 200 shares follow? appeared first on Motley Fool Australia.

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Investors aren’t letting any dips go to waste. The S&P/ASX 200 Index (Index:^AXJO) staged a late recovery to finish the day 0.4% higher after slumping by more than 1% in the morning.

This is happening quite regularly in recent times and reinforces my belief that there’s a lot of money waiting on the sidelines.

Eager buyers

The limited selection of investment alternatives to equities and fear-of-missing-out (FOMO) are supporting the market amid the COVID-19 market sell-off.

But this isn’t an excuse to buy ASX shares indiscriminately. Since the ASX 200 bounced from its bear market low on March 23, many stocks have run ahead of fundamentals.

Those hunting for buying opportunities could find their targets among the latest batch of ASX shares that were just upgraded to by brokers to “buy”.

Dressed for success

One potential stock for your watchlist is Kathmandu Holdings Ltd (ASX: KMD). Credit Suisse upgraded the adventure gear retailer to “outperform” from “neutral” as it believes its attractive valuation overrides the near-term uncertainties.

“While we acknowledge KMD faces a period of earnings uncertainty, we believe the strength of the company’s execution during the peak of lockdown restrictions; the consumer appeal of its brands; and its robust balance sheet all underpin our confidence in the company’s recovery,” said the broker.

“This view is supported by our scenario analysis which highlights valuation upside under all scenarios.”

Kathmandu is listed on both the ASX and the New Zealand Stock Exchange. Credit Suisse’s price target on the stock is NZ$1.40 a share, which implies a more than 40% upside from Wednesday’s closing price.

Beating the street

Another stock on the upgrade list is CSR Limited (ASX: CSR). Wilsons lifted its rating on the building materials group to “overweight” from “market weight” after CSR posted its full year result.

As foreshadowed in my article yesterday, brokers will be busy upgrading their earnings forecasts for the group.

“We are encouraged by the better than expected result, which highlighted market share growth and margin resilience in the Building Products segment, despite challenging construction markets,” said Wilsons.

“While there is potential for some earnings volatility in Building Products due to the timing and stage of the residential construction cycle, we are confident a robust balance sheet, advanced aluminium hedging profile and an attractive property portfolio provides support.”

The broker’s 12-month price target on CSR is $4.87 a share, which implies a 36% upside if dividends are included.

More reading

• How to use your superannuation to become a millionaire
• Top brokers name 3 ASX 200 shares to buy right now
• LNG spot price surge benefits ASX 200 shares
• The smartest ASX shares to buy if you have $2,000
• ASX gold shares steady: Can gold provide your portfolio with defensive and safe returns?

Motley Fool contributor Brendon Lau has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

The post The latest ASX shares upgraded by brokers to “buy” appeared first on Motley Fool Australia.

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I’m a big advocate of buy and hold investing and believe it is one of the best ways to grow your wealth over the long term.

If you can identify a company which has the potential to grow consistently over a long period of time, you can generate some incredible returns on the share market.

A prime example of this is CSL Limited (ASX: CSL).

CSL, which was previously known as Commonwealth Serum Laboratories, was established in Melbourne in 1916 to service the health needs of a nation isolated by war.

In the years that followed CSL provided Australians with access to 20th century medical advances including insulin and penicillin, and vaccines against influenza, polio and other infectious diseases.

It was incorporated in 1991 and then listed on the Australian share market in 1994 for a stock-split-adjusted price of $0.76 per share. Today its shares are changing hands for a massive $306.97.

This means investors that invested $10,000 into the CSL IPO back in 1994 would have received 13,157 shares for their troubles.

Fast-forward to today and those 13,157 shares have a total value of $4,038,804.29. Yes, you read that correctly, a $10,000 investment is now worth over $4 million today.

Don’t forget the dividends.

But it gets better. Very few people would turn to CSL for dividends. Due to the premium that its shares (deservedly) trade at, CSL’s shares will generally only ever yield a ~1% dividend.

However, if you bought shares at the IPO, you would be counting down the days to its dividend payments each year.

In FY 2020 CSL is expected to pay a dividend of approximately $3.13 per share. This means that those 13,157 shares we acquired at the IPO would generate total dividends of $41,200 this year.

That’s more than four times the original investment and, based on its current trajectory, is only likely to increase over the coming years.

And while not every company will generate as strong returns as this, if you choose wisely and focus on companies with strong business model and positive long term growth prospects, you might just identify a future millionaire maker.

More reading

• How to become a better investor in just 2 minutes
• 4 top ASX shares to invest $4,000 into immediately
• The smartest ASX shares to buy if you have $2,000
• Why the coronavirus is still affecting share markets
• Is this ASX healthcare share about to soar?

James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of CSL Ltd. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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